Armada files Chapter 15

Another bulk carrier has been hit by the downturn in the market. International shipping companies are really taking a beating. The bulk carriers are the first to be hit, but before long we will see other types of carriers in the same situation.

Armada, a Singapore based carrier filed for Chapter 15. I had never heard of Chapter 15 until recently. Apparently it allows foreign companies to reorganize outside of the U.S., and protects them from U.S. creditors.

Anyway, what is really interesting about this Armada problem, is they made money in 2008, but hit financial problems due to freight futures (FFA's).

The filing said the carrier's losses from derivatives would hit $375 million this year due to the bottoming out of charter rates. The company is the latest to be impacted by the drop in freight and charter rates for bulk cargo transportation. The benchmark index for the sector, the Baltic Dry Index, plummeted 92 percent from a record high in the summer to a record low in December as demand for raw materials dwindled in North America, Europe and Asia.
Armada actually turned a net profit of $130 million in 2008, according to the filing, but admitted losses on future freight contracts will be steep if rates continue to stay low, as analysts predict they will through at least the first half of 2009.

click here for complete article in American Shipper